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One idea is for the 120,000 problem families who were identified in the Government’s riots review to be given the Oyster-style cards.

A source close to Mr Duncan Smith said: “There are people who are using benefits to fund a habit and children are going hungry.

“It is something that he is serious about – if he can make it work and he can legislate then he is very keen to do it.”

The charge card model is based on a “basics card” scheme which started to be rolled out for thousands of people in Australia in August this year.

Instead of being given cash or cheques, claimants are now issued with electronic “credit” cards to purchase key “priority” items at approved stores across the country.

Money is electronically placed on the card once a fortnight, when people receive their benefit payments. No more than A$1,500 (£961) can be spent per day. If money is not spent, it can be built up as savings.

Mr Duncan Smith said he was against using a US-style food stamps system because they are often traded as a form of currency.

The Cabinet minister disclosed his plans at a meeting of Conservative activists at the party conference this week.

He said: “I am looking at the moment at ways in which we could ensure that money we give them to support their lives is not used to support a certain lifestyle.

“I am certainly looking at it – I am going through that in some detail… With the use of cards, we are looking at that to see if we can do something.

In the immediate aftermath of the 2011 riots in English cities, Prime Minister David Cameron pledged to turn around the lives of the 120,000 by 2015.

He said: “I have an ambition, before the end of this Parliament, we will turn around the lives of 120,000 most troubled families.

“We need more urgent action, too, on the families that some people call ‘problem’, others call ‘troubled’, the ones that everyone in their neighbourhood knows and often avoids.”